The Supreme Court has asked the Centre to submit its response to a petition filed by a section of India industry challenging the constitutional validity of Section 171 of the GST Act that obliges companies to cut the prices of their products whenever taxes are reduced.
The so-called anti-profiteering provision is designed to stop companies from raking in money by failing to pass on the full benefit of any tax cut to their customers.
A three-judge bench of Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala and Justice Manoj Misra issued notices on an appeal filed by Excel Rasayan Pvt Limited challenging a Delhi High Court division bench judgement of January 29, which had upheld the constitutional validity of the provision on the ground that it was a “beneficial legislation”.
The high court had passed the impugned order while dismissing a batch of petitions filed by major corporate houses challenging the anti-profiteering legislation.
According to the appellant the impugned legislation was brought in without proper discussion or methodology in an arbitrary manner.
It complained that the high court failed to appreciate the various contentions and averments raised by the companies and had erred in proceeding to dismiss their petitioner.
In its January 29, 142-page judgment, a bench of acting Delhi High Court Chief Justice Manmohan and Justice Dinesh Kumar dismissed the batch of petitions filed by major corporate houses saying, “this Court is of the view that Section 171 of the Act, 2017 is broad enough to empower the Central Government to prescribe penalty and interest to ensure that the suppliers are deterred from pocketing the benefits meant for the consumers when taxes are foregone by the Government”.
Merely empowering NAA (National Anti-Profiteering Authority) to direct return the amounts so pocketed by the supplier/registered person would not have a sufficient deterrent effect on deviant behaviour unless interest and penalty are levied to prevent such actions from taking place in the first place.
The SC issued notices to the finance ministry and the NAA, among others.
